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GUEST ARTICLE: Building Bridges In Thinking About Impact Investing - Part 7

Benjamin Bingham, April 30, 2018

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In a series of articles, a prominent US figure in the impact investing space explores how to pull together disparate ways of thinking about the world to show how this model of managing money should be addressed. Here is the seventh essay.

This is the sixth instalment from author, Benjamin Bingham, CFP, founder and CEO, 3Sisters Sustainable Management. He is the author of Making Money Matter/Impact Investing to Change the World (www.makingmoneymatterbook.com). His previous essay in the series can be found here and an item introducing Ben can be seen here. As ever, the views of guest authors are not necessarily shared by the editors of this news service and we invite readers to respond. Email tom.burroughes@wealthbriefing.com

Industrials or Resource Transformation

The so called Dow Jones Industrials are the 30 largest corporations in the world, and the term “industrials” is left over from the days when all the largest companies were manufacturers.  Now companies like, Google, whose services are more virtual than manufactured, make up much of this elite group. Nevertheless, as a sector, scale is assumed; it is less about handcrafts than factories. So, for the purposes of a diversified ecosystem of investments the industrial sector can be the manufacturing sector or, as the Sustainability Accounting Standards Board (SASB, pronounced “sazbee”) calls it: the Resource Transformation sector…i.e. using industrial scale equipment to repurpose natural and man-made stuff for entering or re-entering the world of commerce.

The question now becomes:  what needs to be manufactured on a large scale? What large scale manufacturing is not harmful to the planet, due to its dependence on the extraction of minerals, including petrochemicals and metals? Very little it might seem at first.  And yet there are large scale companies that manufacture goods out of recycled metals, natural renewable resources like wood from sustainably managed forests, or other used materials that are restored and reused on a large scale. The problem with scale is the scale of waste.  If it is not wasted the product may be used again and again, because it is designed: (1) to meet a real need; (2) to be reusable or renewable and; (3) to improve the quality of life (so it is not “thrown away”).

To avoid problems the best premise is to leave minerals below the earth’s crust and to avoid the use of chemical compounds that do not appear in nature. We can move in this direction by favoring the reduction of wasted materials, and the recycling and reuse of stuff that is already in the biosphere. When choosing materials to transform, bio-degradability is an ideal feature, so that in the end, matter returns to the earth. Good examples are latex rather than acrylic adhesives and inks that are soy based rather than petroleum based and toxic.

However, recycled materials such as plastic clothes and carpets may be harmful to the skin, while recycled paper contains chlorine and ink toxins, and recycled cotton may contain pesticide and dye toxins, and wood may contain toxins applied to it, etc. These are complex issues.  One study posited that fossil fuel based plastic newspapers with soy ink washed off and printed again for the next edition would be a healthier solution than wasting gallons of water to wash toxic inks from newspaper into the waste stream! See Cradle to Cradle design: https://en.wikipedia.org/wiki/Cradle-to-cradle_design . Nevertheless, for the remainder of this chapter we will focus on manufacturing with bio-degradable materials derived from nature.

Natural materials
Wild plants from the mountains, deserts, and prairies are being transformed into essential oils, soap, tea, incense, cosmetics and the like. Investors and consumers need to ask if the businesses defend/preserve the wilderness, pay fair wages to the labor force and if the amounts harvested are sustainable or draining to the ecosystem.

Hemp, though related to the recreational drug, marijuana, is less than 1 per cent THC. It is fast growing, hardy, with broad leaves that block out sunlight, inhibiting competing plants, so it does not require herbicides and does well without synthetic fertilizers/pesticides. Hemp can grow to 15ft and be harvested 3-4 months after sowing.

George Washington said in 1794: “Make the most of the hemp seed. Sow it everywhere.”  The whole plant is useful for food, body care, medicine, textiles and any kind of paper can be made from hemp. In fact, it produces 4 times as much cellulose for paper per acre as trees and because of the creamy color requires less bleach. Hemp can also be used as a biomass fuel and for manufacturing biodegradable plastics such as composite parts for cars and skateboards.

Bamboo is strong with sturdy renewable shoots. Thomas Edison used bamboo as rebar in his pool and it still hasn’t cracked. It can be used for paper/pulp, housing, construction and flooring as well as textiles. It may be preserved by smoking  and can be sealed with nontoxic substances. It is not clear if the glues used in bamboo flooring are non-toxic and there may be other manufacturing concerns.

Wood products from Trees ideally should come from sustainably grown timber (see https://ic.fsc.org/en/what-is-fsc-certification ).In any case, trees are breathing in more carbon as carbon pollution increases. The fastest growing hardwood tree, which sequestrates carbon at many multiples of the average tree is the Empress Tree (full disclosure: we are investors) http://worldtreecop.com/empress-tree/ .

Cellulose from wood makes wood convertible to paper, paperboard, cardboard and is reprocessed into many post-consumer or recycled products. It is used in the production of cellophane, rayon, water-soluble adhesives/binders; wall paper paste, thickeners/stabilizers; and even in processed foods, to prevent caking.

Cork for flooring grows on special trees that are not harmed by the harvesting of the bark.

Oil Palms produce about a third of plant-based oil consumed globally. Some 20 per cent of the fruit yields oil, while 20 per cent is bunch matter for biomass-based power and 60 per cent is problematic waste effluent. Considered healthy because it is cold pressed and trans-fat free, the kernel oils are also used to make soap, cosmetics, and detergents. The meal is also made into palm kernel cake for animal feeds.

Some 89 per cent of crude palm oil production is in Malaysia and Indonesia often causing great harm. After the loggers are gone about 25 synthetic pesticides, herbicides and insecticides may have been applied, causing water and land health issues. The burning and clearing of forests is done at the loss of clean air, pastures, forests (hunting), smallholder farming, habitat and biodiversity loss (e.g. tigers, orangutans, elephants, rhinoceros).
In addition, rather than benefitting the community contracts often result in a concentration of land-ownership and a loss of community control.

The Roundtable on Sustainable Palm Oil (www.rspo.org) is a partnership between the industry and the WWF and oversees strong guidelines for palm oil production.

Bio-plastics converted from cellulose that do not compete with food sources may become a good alternative for packaging. If bioplastics are mixed with plastics, the reclaimed plastic is not recyclable. Bio-plastics are often corn or sugar cane based taking up land for food and may be hard to compost. Additives can accelerate biodegradability but may be toxic.

Clothing from nature. Animal based materials are problematic due to the need for acreage and large amounts of water to maintain each animal. However, like the difference between the shallow biting heat of microwaved food and the deeper warmth of food from a wood oven, there are many that would submit that children especially benefit from the warmth and breathing quality of wool from sheep, as well as grown natural materials such as organic cottons, linens, rayons (from cellulose) and again, hemp.

In summary, whether natural or man-made materials are used there are many issues to keep an eye on. As an investor we need watch groups and regulatory bodies to oversee this complex world of substance transformation for the good of all!

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